The benefits of new technologies can seem hidden at first – but innovation always brings growth. Open banking is a great example on which the government is basing its strategy, writes Andrew Griffith
We’re living in an era of rapid technological change, with new ideas constantly exploding into life. But this change doesn’t just happen: it’s driven by entrepreneurs who have a desire to go further, to disrupt the status quo, and to bring to market new products and ideas.
This government wants to do everything it can to encourage this entrepreneurial spirit – to unlock the untapped potential technological advancement can bring to every town and city, and to grow the economy. This is why embracing technological change is one of the pillars of our financial services strategy, which was set out by Rishi Sunak during his time as Chancellor.
As the late Steve Jobs once said: “innovation distinguishes between a leader and a follower.” And he was right; Apple has continually embraced technological change, allowing people to connect with anyone, at any time, almost anywhere around the world. And it’s with unleashing innovation in mind that at the Autumn Statement, the Chancellor committed to reform EU-derived laws that have held us back in five exciting industries.
These plans include reforming our financial services regulatory framework – which we announced last year as the Edinburgh Reforms. This year we’ll be reforming the rules governing digital technology, life sciences, green industries, and advanced manufacturing.
For those who question whether we will achieve this, you only have to look at the stunning success of UK fintech, which supports tens of thousands of jobs, with booming clusters in Cardiff, Belfast, Manchester and Edinburgh. And despite challenging economic headwinds, the sector is still attracting more investment to the UK than the next ten European countries combined, and is second globally only to the US – where I have spent the last week encouraging more stateside capital to flow through to UK businesses.
A significant portion of the UK’s fintech sector uses open banking – a relatively new technology. But it’s a fantastic example of the seemingly hidden benefits new technologies can bring. If you access multiple accounts that you hold with different financial institutions – such as a bank – in one app, you are probably already using open banking technology. It is estimated that 6.55 million adults in the UK already do. Research shows that a net 69 per cent of people using the technology found it easier to keep track of spending – and 55 per cent of people found it easier to budget.
More broadly, the technology enables fast, reliable, and low-cost payments, allowing businesses to be paid instantly and to save money. In some cases, it offers a competitive, cheaper alternative to card schemes. In December alone, 7.5 million payments were made in the UK using open banking, up 230 per cent year-on-year. There are over 200 providers of open banking in the UK, more than five times as many as our closest European rival, and over 600,000 small and medium size enterprises are using the technology to improve their businesses.
None of this progress would have been possible without the work of the Open Banking Implementation Entity, which last week confirmed delivery against its roadmap set by the Competition and Markets Authority. And it’s also important to recognise the contribution made by UK banks, who have funded and supported work to date – often themselves investing in pioneering open banking start-ups.
My task now is not just to lock in this progress – but to build on it to ensure the benefits of open banking technology and broader innovation are felt by as many people and businesses in the UK as possible. Because as the Prime Minister set out in his New Year’s speech, we need to change the way our country works and raise our aspirations, to deliver a more innovative economy that creates better-paid jobs.